Charter 2003 Annual Report Download - page 131

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CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003, 2002 and 2001
(dollars in millions, except where indicated)
15. Fair Value of Financial Instruments
The Company has estimated the fair value of its Ñnancial instruments as of December 31, 2003 and 2002
using available market information or other appropriate valuation methodologies. Considerable judgment,
however, is required in interpreting market data to develop the estimates of fair value. Accordingly, the
estimates presented in the accompanying consolidated Ñnancial statements are not necessarily indicative of the
amounts the Company would realize in a current market exchange.
The carrying amounts of cash, receivables, payables and other current assets and liabilities approximate
fair value because of the short maturity of those instruments. The Company is exposed to market price risk
volatility with respect to investments in publicly traded and privately held entities.
The fair value of interest rate agreements represents the estimated amount the Company would receive or
pay upon termination of the agreements. Management believes that the sellers of the interest rate agreements
will be able to meet their obligations under the agreements. In addition, some of the interest rate agreements
are with certain of the participating banks under the Company's credit facilities, thereby reducing the exposure
to credit loss. The Company has policies regarding the Ñnancial stability and credit standing of major
counterparties. Nonperformance by the counterparties is not anticipated nor would it have a material adverse
eÅect on the Company's consolidated Ñnancial condition or results of operations.
The estimated fair value of the Company's notes, credit facilities and interest rate agreements at
December 31, 2003 and 2002 are based on quoted market prices or a discounted cash Öow analysis using the
Company's incremental borrowing rate for similar types of borrowing arrangements and dealer quotations.
A summary of the carrying value and fair value of the Company's debt and related interest rate
agreements at December 31, 2003 and 2002 is as follows:
2003 2002
Carrying Fair Carrying Fair
Value Value Value Value
Debt
Charter convertible notesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 774 $ 732 $1,383 $ 295
Charter Holdings debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,316 7,431 9,222 3,867
CCH II debtÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,601 1,680 Ì Ì
CCO Holdings debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 500 510 Ì Ì
Credit facilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,227 6,949 7,789 6,367
Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 229 238 277 212
Interest Rate Agreements
Assets (Liabilities)
SwapsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (171) (171) (258) (258)
Collars ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (8) (8) (34) (34)
The weighted average interest pay rate for the Company's interest rate swap agreements was 7.25% and
7.40% at December 31, 2003 and 2002, respectively. The Company's interest rate collar agreements are
structured so that if LIBOR falls below 5.3%, the Company pays 6.7%. If the LIBOR rate is between 5.3%
and 8.0%, the Company pays LIBOR. The LIBOR rate is capped at 8.0%, if LIBOR is between 8.0% and
9.9%. If the LIBOR rate rises above 9.9%, the cap is removed.
F-33